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Being a student can be a costly experience, particularly for those in cities with high living expenses, such as Sydney or Melbourne. Students who don't have the benefit of parents supporting them through their years of study will need to source funding that is realistic in terms of repayments. That's where a student personal loan could help, but is it the best option for you?
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What are student loans?
Student loans are a type of personal loan designed to help students pay for courses, university tuition and fees, as well as living expenses. They are a common feature of higher education in many parts of the world.
For those starting out at university, growing sufficient savings to fund your studies may feel nearly impossible. Even with a part-time job, this is not likely to give students a serious nest egg to fund their courses. For many young people – and mature students as well – a student loan from either a public or private source of finance is the only way to afford their education.
Taking out a student loan can be seen as an investment in your financial security over a number of years, as you're aiming to fund a course or degree that can improve your job opportunities over your career and have you earning more than you might otherwise have done.
Who can get a student loan?
Much like with all personal loans, education loan eligibility in Australia is up to the discretion of the lender you’ve chosen.
For some lenders, borrowers may be considered for a student loan by simply having a certain residency status and meeting the minimum age requirement. While for others, borrowers may need to additionally meet a minimum annual income, have a good credit rating, and often more.
Check your preferred lender's eligibility criteria or consider reaching out to them directly for more information.
Do you have to be an Australian resident to get a student loan?
If you aren’t an Australian Permanent Resident, it's important to carefully examine the eligibility criteria of your preferred lender to see if they provide financing for non-permanent residents, like international students.
There are a range of personal loan lenders who provide finances for students, and one of the best ways to choose the most competitive product to fund your education is to utilise comparison tools, such as RateCity’s student loan comparison table.
Are there age limits on who can get a student loan?
Generally, the only age restriction placed on student loans is that the borrower is at least 18 years of age. This restriction applies to any kind of credit product.
Most lenders don't specify an upper limit in regards to age, but it's important to familiarise yourself with the terms of your preferred student loan before you hit the 'apply now' button, as each product will have different requirements.
What are the features of a student loan?
| Feature | About |
| Secured personal loan | This allows you to put down an asset, such as a car or equity in a home, as security on your personal loan. This usually results in a lower interest rate as you’re seen as a less risky borrower, however if you fail to make your repayments, this security can be repossessed by the lender. |
| Unsecured personal loan | Does not involve putting down an asset as security, and therefore usually comes with a higher interest rate. This type of personal loan may come with more flexibility though. |
| Tranche funding | Some lenders can release your funds in portions throughout the length of your course. |
| Repayment schedule | Lenders allow you to choose your student personal loan repayment schedules, such as fortnightly or monthly, allowing for flexibility in your budget planning. |
| Loan term | The length of time you have to make loan repayments towards your loan amount, usually between two and five years. |
What student loans can I get from the Australian government?
Student loans are one way to bridge the gap between what Centrelink is able to provide through assistant programs. According to StudyAssist, there are a range of government loans and subsidies in place, including:
- HECS-HELP - a loan scheme to help eligible Commonwealth-supported students to pay their student contribution amounts through a loan or upfront discounts.
- FEE-HELP - a loan to help eligible fee paying students to pay their tuition fees.
- SA-HELP - a loan that assists eligible students to pay for all or part of their student services and amenities fees.
- OS-HELP - a loan to help eligible Commonwealth supported students pay their overseas study expenses.
- VET Student Loans - a loan program that helps eligible students enrolled in certain higher-level vocational education and training courses at approved course providers to pay their tuition fees.
Loans from the government can be attractive in terms of good repayment conditions, but not everyone is necessarily eligible for these, and even those receiving a government loan may need to consider taking out a student loan from a private provider.
How do I get approved for a student loan?
Approval for a student personal loan in Australia could depend on individual finances and the lender’s eligibility criteria. One of the best things you can do is to try and improve how reliable lenders perceive you as a borrower, as well as to research and compare your student personal loan options before submitting a loan application.
- Examine your credit history – If you have a bad credit history, your chance of approval for a student loan will be negatively impacted. If you have no credit history or a short credit history, lenders will take this into consideration for student loans, as most students are too young to have developed an excellent credit history.
- Pay off your debt – If you have existing debt from a credit card or another personal loan, lenders will see this when they examine your personal finances. Try to pay off your debt, or at least consistently meet your monthly repayment amounts to help improve your credit score.
- Regular income – Having a regular income source, such as a full-time job, will show lenders that you have stability in your finances. While having a full-time job can be near-impossible for many students, lenders can take this into consideration, and look favourably on those with casual or part-time work.
- Compare student loan options - RateCity's comparison tools, such as the student loan comparison table on this page, can help you ensure you’re getting the most competitive personal loan for your financial needs.
- Carefully examine the eligibility criteria of the lender - This is particularly important if you are an international student, to make sure you’re applying for a student loan you could be approved for.
Alternatively, you can consult a finance broker and let them organise the loan on your behalf. Often finance brokers won’t charge for the service; instead, they’ll earn a commission from the lender.
What are the pros and cons of student loans?
For many students, a student loan is essential to be able to manage finances during the period of study. Often with lower than average interest rates and favourable repayments terms, they can provide financial security while at university.
Further, for young students with non-existent credit history, lenders won’t necessarily reject your application. Instead, they may offer you a higher interest rate than someone with a great credit score.
If you take out a student loan and are able to defer your payments, this might seem like it’s helping your immediate financial situation. However, that interest is likely to be charged on the loan right from the start, and after a number of years that can add a lot of money to what you will have to repay.
Don't forget to also factor in any fees and charges, such as establishment fees, early repayment fees, and other ongoing fees or monthly fees, as they will also contribute to the overall cost of the loan.
- Enables you to fund your education
- Often lower than average interest rates
- More understanding eligibility criteria
- Risk of falling into debt
- Deferring payments will lead to higher interest
Kate Cowling
Kate was one of RateCity's Personal Finance Commentators. She has been a journalist for more than a decade, most of which has been spent writing about money. Most recently, she was the Australian Financial Review's personal finance correspondent. She is passionate about personal finance and women's independence.
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Frequently asked questions
What is a personal loan?
A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.
Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.
What is a bad credit personal loan?
A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.
Does refinancing a personal loan hurt your credit score?
Personal loan refinancing means taking out a new loan with more desirable terms in order to access a more competitive interest rate, longer loan term, better features, or even to consolidate debts.
In some situations, refinancing a personal loan can improve your credit score, while in others, it may have a negative impact. If you refinance multiple loans by consolidating these into one loan, it could improve your credit score as you’ll have only one outstanding debt liability. Your credit may also improve if you consistently pay the instalments on time.
However, applying to refinance with multiple lenders could negatively affect your credit if your applications are rejected. Also, if you delay or default the repayment, your credit score reduces.
Can I merge my personal loan with my home loan?
Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.
However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.
Can I repay a $3000 personal loan early?
If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.
Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.
Is a personal loan a variable or fixed-rate loan?
Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.
A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early - or at least not without a penalty.
With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.
Can you refinance a $5000 personal loan?
Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.
If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.
How can I get a $3000 loan approved?
Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.
Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.
How long does it take to get a student personal loan?
Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.
Can you pay off a quick loan early?
Many lenders will allow you to make extra repayments onto a quick personal loan when you can afford them, or even exit the loan early, which can help reduce the total interest you are charged. Be sure to check your quick loan’s terms and conditions, as some lenders charge early exit fees for paying off a loan ahead of schedule.
Can I get a bad credit personal loan with a guarantor?
Some lenders will consider personal loan applications from a borrower with bad credit if the borrower has a family member with good credit willing to guarantee the loan (a guarantor).
If the borrower fails to pay back their personal loan, it will be their guarantor’s responsibility to cover the repayments.
Can I get guaranteed approval for a bad credit personal loan?
Few, if any, lenders would be willing to give guaranteed approval for a bad credit personal loan. Borrowers with bad credit histories can have more complicated financial circumstances than other borrowers, so lenders will want time to study your application.
It’s all about risk. When someone applies for a personal loan, the lender evaluates how likely that borrower would be to repay the money. Lenders are more willing to give personal loans to borrowers with good credit than bad credit because there’s a higher likelihood that the personal loan will be repaid.
So a borrower with good credit is more likely to have a loan approved and to be approved faster, while a borrower with bad credit is less likely to have a loan approved and, if they are approved, may be approved slower.
What is the average interest rate on personal loans for single parents?
Like other types of personal loans, the average interest rate for personal loans for single parents changes regularly, as lenders add, remove, and vary their loan offers. The interest rate you’ll receive may depend on a range of different factors, including your loan amount, loan term, security, income, and credit score.
Can I get a personal loan if I receive Centrelink payments?
It is hard, but not impossible, to qualify for a personal loan if you receive Centrelink payments.
Some lenders won’t lend money to people who are on welfare. However, other lenders will simply consider Centrelink payments as another factor to weigh up when they assess a person’s capacity to repay a loan. You should check with any prospective lender about their criteria before making a personal loan application.
What causes bad credit ratings/scores?
Failing to repay loans and bills will damage your credit score. So will falling behind on your repayments. Your credit score will also suffer if you apply for credit too often or have credit applications rejected.
How long does it take to get a bad credit personal loan?
In the best-case scenario, an application for a bad credit personal loan can be made within minutes and then be approved within 24 hours. However, if a lender needs more information or needs more time to verify the provided documents, the application process may take longer.
How are credit ratings/scores calculated?
Different credit reporting bodies may use different formulas to calculate credit scores. However, they use the same type of information: credit history and demographic profile.
They’re likely to look at how many credit applications you’ve made, which lender the applications were for, what purpose they were for, how much they were for and your repayment record. They’ll also look at your age and postcode. They’ll also look to see if you’ve had any bankruptcies or other relevant legal judgements against you.
Your score can change if your demographic profile changes or new information is added to your file (such as a new loan application) or existing information is removed from your file (i.e. because it has reached its expiry date).
Which lenders offer bad credit personal loans?
Several dozen lenders offer bad credit personal loans in Australia. These are generally smaller lenders that aren’t household names.
How do I consolidate my debt if I have bad credit?
The worse your credit history, the harder you will find it to consolidate your debts, because lenders will be less willing to lend you money and will charge you higher interest rates.
However, people with bad credit histories can make debt consolidation work by following this three-step process:
- First, find a lender willing to give you a bad credit personal loan. This process will be simplified if you go through a finance broker or use a comparison website like RateCity.
- Second, make sure the interest repayments on your new loan are less than the repayments on the loans being replaced.
- Third, instead of spending those savings, use them to pay off the new loan.
What interest rates are charged for personal loans?
Lenders aren’t allowed to charge interest on loans of $2,000 and under. Instead, they make their money by charging a one-off establishment fee of up to 20 per cent and a monthly account-keeping fee of up to four per cent. Lenders might also ask you to pay a government fee.
For loans between $2,001 and $5,000, lenders can make their money in only two ways: a one-off fee of $400 and annual interest rates of up to 48 per cent.
For loans of $5,001 and above, or for loans that have terms longer than two years, lenders can charge annual interest rates of up to 48 per cent.
Those fee caps don’t apply to loans offered by authorised deposit-taking institutions such as banks, building societies or credit unions, although such institutions are highly unlikely to charge interest rates of anywhere near 48 per cent.